TOPEKA, Kan. — Amid a growing industry debate about the efficacy of a restrictive field of membership bill about to become law, attorneys for Kansas credit unions last week were grappling with definitions and interpretations to handle future branch and member expansion.
Insisting again that the FOM measure awaiting the signature of Governor Kathleen Sebelius has merit and is something that CUs can live with, the Kansas Credit Union Association said the county and population provisions in the bill would provide "unique growth opportunities" for large numbers of Kansas CUs.
A more negative scenario of the bill's impact, however, was being expressed by outside consultants and echoed in part by some of the hardest hit CUs in Wichita and Topeka, which claim the Kansas FOM-merger bill represents a sharp turnaround for FOM growth and a cave-in to banker interests.
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Kirk Cuevas, a partner in Dollar Associates and the former NCUA chief senior counsel, said the FOM bill presents a host of prickly problems for regulators and their CUs as they try to figure ways to meet the complex limits, particularly on a one million population threshold.
"What do you when you have to revise for population increases?" asked Cuevas, whose partner is former NCUA Chairman Dennis Dollar.
The population definitions represent new legal stumbling blocks in contrast to the federal "well-defined community" language of NCUA FOM rules.
Stressing he was not privy to the legislative process in enacting the Kansas bill, Cuevas faulted some of the bill's language as "as a recipe for banker mischief."
In particular, he cited lengthy notice and comment rules for branch and merger applications following along bank regulatory lines. "That could be acrimonious and litigious," predicted Cuevas, adding it was unclear whether CU foes might use the Kansas bill as a model in other states to limit CU member and branch expansion.
In a formal statement, however, the Kansas Credit Union Association painted a much more positive picture for CU growth despite the negative aspects of the bill.
"Because of the complexity of the bill's provisions, the effect on individual credit unions will be as unique as each credit union's field of membership," said the KCUA. "Credit unions will be able to choose any combination of occupational or associational or geographic fields of membership."
"We are currently working with individual credit unions to help them address the grandfather provisions and develop strategies for their future growth," said Marla Marsh, president/CEO of KCUA.
The league said grandfather provisions include:
-Existing credit union members and their immediate family members;
-Existing occupational and associational groups;
-Current geographic fields of membership up to one million in population; and
-All current branch counties outside the geographic area.
Future growth provisions of the bill include:
-Unlimited combinations of associational, occupational and geographic fields of membership;
-Growth up to one million in population for CUs headquartered in a metropolitan statistical area as long as the counties share immediate borders to the MSA;
-An escalator formula to allow for population growth beyond one million in MSA areas; and
-Growth up to 500,000 in population using multiple contiguous political jurisdictions for credit unions not headquartered in an MSA area.
As an example of how CUs may use the changes in the field of membership provision, KCUA said, a CU based in Hays, Kan., (not an MSA) could expand its geographic field of membership to almost two-thirds of the state by choosing the less populated counties in western Kansas. Another alternative for the same CU would be to choose more populated counties to the east, as long as they were contiguous and they did not exceed 500,000.
KCUA outlined other scenarios under the new law as well.
"Negotiating from a position of strength allowed Kansas credit unions the benefit of securing key provisions that are unique to Kansas," said Marsh. "For example, one million people equals more than one-third of the Kansas population, which allows many of the 88 state-chartered credit unions the opportunity to grow based on the strategic needs of the credit union and the desire to meet the financial needs of Kansas consumers.
"Although these provisions provide growth opportunities beyond the federal charter for Kansas credit unions," she went on, "they may not work for states with greater population density."
Although the law will become effective July 1, credit unions will have until Jan. 1, 2009, to come into compliance under the grandfathering provisions. Credit unions seeking an expanded field of membership beyond grandfathering must do so under the new law starting July 1.
KCUL noted that Gov. Sebelius has 10 days to sign the bill or it automatically becomes law.
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